Presented by:

Obisike Francis Emezi

Learning Outcome Statements
 Accounting and reporting of current taxes,

 Accounting and reporting of deferred taxes

 Taxation in company financial statements

 Deferred taxes in consolidated financial

statements
These are taxes computed based on the accounting
profits of the reporting entity for the year.
Profit or
SOCIE SOFP
loss a/c

Change in Liability if
(Expense)
a/c policy unpaid.

Correction (Asset) if
Income
of error overpaid.
 Adjustment for
Applying tax
(over)/under Current tax
rate to
provision in expense
income/expense
prior periods
 Temporary
differences
Affects both
Impact of income,
differences in expenses, assets,
AR & TR liabilities &
equity

Deferred
taxes
• Deductible • Taxable
temporary temporary
differences differences
Liabilities in
AR higher Assets in AR
than higher than
liabilities in assets in TR
TR

Expenses in Income in
AR lower AR higher
than TR than TR
Deductible
temporary
differences
Carry
forward of
tax losses
Carry
forward of
tax credits
DTL Arises solely because
of taxable temporary
differences
DTL DTA Recognise to the
Recognise for all extent that there will
taxable temporary be sufficient profits
differences in future to make a
claim

Exclude differences
Exclude if they arise
arising from
from items not
goodwill and for
affecting or tax
items not affecting
profits or from
accounting or tax
goodwill
profits
 Recognise as
income or expense
in P/L except for Recognise as
Use future tax rate No discounting
OCI items on biz NCL in SOFP
combinations
items
 Apply
DTR on
temporary
difference

Tax
expense
in P/L
Current
tax
expense
THE
END
Learning Objectives:
 Identifying the main features of IFRS1

 Objectives of IFRS 1

 Define terms associated with IFRS 1

 Explaining the scope of IFRS 1

 Understanding the optional exemptions and

mandatory exceptions in IFRS 1, and
 The disclosure requirements in IFRS 1
IFRS 1 highlights the rules for:
 Recognising assets, liabilities and equity in the
opening SOFP,
 Derecognition of assets, liabilities and equity
components recognised in local GAAP but
which are not permitted under IFRS,
 Reclassification of assets, liabilities and equity
from former GAAP to IFRS, and
 Measurement of assets, liabilities and equity in
the opening SOFP in line with IFRS
requirements.
 Starting point
Cost benefits
for IFRS
considerations
reporting

Promotion of
transparency
in IFRS
adoption
Transition Adoption Reporting
date date date
ICAN Plc wishes to publish its financial reports for
the year ended 31st December, 2005 in compliance
with IFRS including comparatives from year 2000
to 2004.
What is the transition date, adoption date and
reporting period?
Transition
•31 December, 2000
date

Adoption
•31 December 2005
date

•1 January 2005 to 31 December,

Reporting
period
2005
 Full GPFS & Interim FS in the
reporting period

Entities using local GAAP

previously

Entities using IFRS without

statement of unreserved
compliance with IFRS

Entities using local GAAP but

apply IFRS where no local GAAP
exist
 A first adopter shall prepare an opening SOFP
on the transition date.
 If an entity changes from Nigerian GAAP on 1st
January, 2012, then such entity shall prepare an
opening SOFP as at 1st January, 2010.
 This is to allow three years SOFP to be
comparable (2010 to 2012).
Use accounting policies in force at the end of the
reporting period of IFRS adoption

Apply those policies retrospectively for the

comparable periods and adjust for the impacts
in the SOCIE through retained earnings

IFRS not yet in force can be applied optionally if

permitted

Retrospective application of accounting policies

does not apply to optional and mandatory
exceptions
Optional exemptions
•Business combinations
•FV/Revalued amount as deemed cost of PPE
•Leases
•Borrowing costs
•FOREX reserves
•Retirements benefit plans
•Compound financial instruments
•Decommissioning liabilities included in PPE

Mandatory exceptions
•Derecognised financial instruments
•Hedge accounting
•Non controlling interests
•Accounting estimates
 How the change from previous GAAP to IFRS
have affected the financial position,
performance, cash flows and equity of the
reporting entity,
 All adjustments made to line items must be
disclosed, and
 The extent of disclosures depends on the facts
and circumstances of the reporting entity.
THE
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Learning Objectives:
 The meaning of share based payment transactions
 Scope of IFRS 2
 Arguments against recognition of share based
payment transactions,
 Types of share based payment transactions,
 Measurement of share based payment transactions,
 Deferred tax implications of share based payment
transactions, and
 Disclosure requirements of IFRS 2
A transaction in which:
 a reporting entity determines the consideration
for services rendered to the entity by its
employees using the value of the entity’s
equity instruments or share options ,or
 in which the consideration given in exchange
for goods or services supplied by a third party
to the reporting entity is determined with
reference to the fair value of the entity’s share
price.
Covers all forms of share based payments
transactions except:
 Where shares are issued to employees in an the
capacity of the employee as a shareholder in a
rights or bonus issues scheme, or
 Shares issued by the reporting entity as
consideration for the acquisition of another
entity in a business combination.
AGAINST IN FAVOUR
Equity settled SBP involves no cost, therefore there The services rendered by staff to the entity gives rise to
should be no charge to profit or loss staff cost, hence such cost should be determined and
expensed so as to reflect the economic reality of the
agreement.

Equity settled SBP transactions has double impact of EPS
The decrease in the numerator of EPS formula results from
the cost incurred through the services supplied by
employee (staff cost) while the increase in the denominator
reflect the fact that additional number of shares has been
issued as consideration for employee services.

Potential for discouraging reporting entities to enter into Where a reporting entity declines to enter into a SBP
SBP transactions transaction, this will only mean that the entity is aware of
the economic reality of such transactions and are willing to
avoid it.
 Cash settled
SBP
Choice b/w
Equity equity or
settled SBP cash
settlement

SBPT
 Market related
(do not consider in
measurement of ESBP)
Performance
conditions

Non market related

Vesting conditions

Consider in measuring
Service conditions
ESBP
 Valuation of non quoted options
 Repricing of options
 Cancellations
 Settlements
 Exercise of options
 Forfeiture of options
 All share based payment transactions have the
potential to create deductible temporary
differences leading to deferred tax assets.
 A description of each type of share based payment
transaction arrangement that existed during the reporting
period,
 The number and weighted average exercise prices of share
options outstanding at the beginning of the period, granted
during the period, forfeited during the period, exercised
during the period, expired during the period, outstanding
during the period and exercisable during the period,
 The total expenses recognised in profit or loss arising from
share based payment transactions, and
 Explanation of carrying amount of liabilities arising from
share based payment transactions at the end of the period
and the intrinsic value of liabilities at the end of the period
for which the counterparty’s right to cash or other assets
had vested by the end of the period.
THE
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Learning Objectives:
 The meaning of revenue

 The five step approach to revenue recognition

 inflow of economic benefits during the period
in the course of the ordinary activities of an
entity leading to increase in equity other than
contributions from equity participants.
 Recognise revenue
Identify the
when or as
separate Identify the contract Allocate the
Identify the contract performance
performance price contract price
obligations are
obligations
satisfied
the parties to the contract have approved the
contract and are committed to perform their
respective obligations

the entity can identify each party’s rights

regarding the goods or services to be
transferred

the entity can identify the payment terms for

the goods or services to be transferred

the contract has commercial substance, and

it is probable that the entity will collect the

consideration to which it will be entitled in
exchange for the goods or services that will
be transferred to the customer.
 Consider if the entity is into a
principal vs agent relationship,

Where the entity is an agent,

revenue is limited to the
commission on the transaction,

Some contracts contain a

bundle of obligations, they
must be separated.
 variable
consideration

the existence of
a significant
financing
component in
the contract

Noncash
consideration

consideration
payable to a
customer
Allocate transaction price to
each performance obligation
in proportion to standalone
selling prices,

Standalone selling price is the

observable price of a good or
service when the entity sells
that good or service
separately in similar
circumstances and to similar
customers,

In a bundled sale, any

discount should be allocated
across each component in the
transaction.
 Recognise Recognise
revenue at a revenue over
point in time time

Consignment Construction
inventory contracts

Apply
Sale and
percentage of
repurchase
progress made
agreement
method

Bill and hold

arrangement
Determine Determine the Recognise profit
contract outcome percentage of in P/L Determine
at inception progress made •Deduct recognised contract
•Compare contract •Use the input cost from recognised asset/liability in
price with total method or output revenue
SOFP
contract cost method
Asset/(liability)
= Profit/(loss)
taken + Cost to date -
Progress billing
THE
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